Mostly Voices [0:00]

A foolish consistency is the hobgoblin of little minds, adored by little statesmen and philosophers and divines. If a man does not keep pace with his companions, perhaps it is because he hears a different drummer. A different drummer.

Mostly Mary [0:18]

And now, coming to you from dead center on your dial, welcome to Risk Parity Radio, where we explore alternatives and asset allocations for the do-it-yourself investor. Broadcasting to you now from the comfort of his easy chair, here is your host, Frank Vasquez.

Mostly Uncle Frank [0:37]

Thank you, Mary, and welcome to Risk Parity Radio. If you have just stumbled in here, you will find that this podcast is kind of like a dive bar of personal finance and do-it-yourself investing.

Mostly Voices [0:52]

Expect the unexpected.

Mostly Uncle Frank [0:56]

It's a relatively small place. It's just me and Mary in here. And we only have a few mismatched bar stools and some easy chairs. We have no sponsors, we have no guests, and we have no expansion plans.

Mostly Voices [1:10]

I don't think I'd like another job.

Mostly Uncle Frank [1:14]

There are basically two kinds of people that like to hang out in this little dive bar. You see, in this world, there's two kinds of people, my friend. The smaller group are those who actually think the host is funny, regardless of the content of the podcast. Funny how? How am I funny? These include friends and family and a number of people named Abby.

Mostly Voices [1:39]

Abby someone. Abby who? Abby normal. Abby normal.

Mostly Uncle Frank [1:47]

The larger group includes a number of highly successful do-it-yourself investors. many of whom have accumulated multi-million dollar portfolios over a period of years.

Mostly Voices [2:03]

The best Jerry, the best.

Mostly Uncle Frank [2:07]

And they are here to share information and to gather information to help them continue managing their portfolios as they go forward, particularly as they get to their distribution or decumulation phases. of their financial life. What we do is if we need that extra push over the cliff, you know what we do? Put it up to 11. Exactly. But whomever you are, you are welcome here. I have a feeling we're not in Kansas anymore. But now onward to episode 267. Today on Risk Parity Radio, we're just going to hack away at our pile of emails. Some from some of our patrons. But before we get to that, I thought we would take a little frolic and detour into the snail mail pile for a little mini rant.

Mostly Voices [3:02]

I want you to be nice until it's time to not be nice. Well, how are we supposed to know when that is? You won't. I'll let you know.

Mostly Uncle Frank [3:17]

Now in the couple weeks leading up to the resolution of the debt crisis or debt ceiling crisis recently, Mayor and I received not one, not two, but three invitations to free steak dinners from our friends in the financial services industry. And I thought we would just Review these for amusement and edification. Now the first one was for an exclusive dinner event at Fleming's Prime Steakhouse and Wine Bar.

Mostly Voices [4:05]

Double secret probation.

Mostly Uncle Frank [4:09]

And they were anticipating a full room. I know why we have reservations.

Mostly Voices [4:13]

I don't think you do.

Mostly Uncle Frank [4:18]

Their highlights were to include a tax alert for 2023. How might the new administration and rising national debt affect your future taxes? Well, it's funny because the administration's not new. I'm not sure they got that memo. Didn't you get that memo? But the elections of the new administration happen on every four years and the last new administration started in 2021, not 2023. I'm sorry. Never mind. And let me guess how you're going to say that the rising national debt affects my future taxes. You're gonna say it means my taxes have to go up. They have to go up. Even though people have been saying the same thing for the past 25 years, and taxes have largely gone down. Surely you can't be serious. I am serious. And don't call me Shirley. The next workshop highlight is supposed to be market volatility strategies to help protect our assets in a potential market downturn. Well, we just had the market downturn last year. I think you're a little late on that. Did you get that memo? And the other part of the memo you may not have received is that we have market downturns periodically as a normal function of the market.

Mostly Voices [5:40]

And I'll go ahead and make sure you get another copy of that memo. Next one, the Secure Act 2.

Mostly Uncle Frank [5:48]

0 new retirement legislation could turn your IRA into a tax burden for your heirs. Oh, a tax burden. What guy in a suit? No!

Mostly Voices [5:56]

It's a tax collector! Hi there, SpongeBob!

Mostly Uncle Frank [6:02]

Well, yes, that's true, but it's public knowledge that there is now a 10-year time limit on inherited IRAs.

Mostly Voices [6:13]

How about that? Who would have thunk it? We always like to avoid confrontation whenever possible. Problem is solved from your end. And then the last topic was inflation. How does it impact your retirement?

Mostly Uncle Frank [6:21]

Real wrath of God type stuff. Shh, the same way it always has. But personal inflation is personal. And then they go on to say that they work exclusively, exclusively, with individuals 55 and older who are at or near retirement. Does that sound like an exclusive group? Please accept my resignation.

Mostly Voices [6:47]

I don't want to belong to any club that will accept me as a member.

Mostly Uncle Frank [6:51]

Interestingly enough, the fine print suggests they are not the usual annuity sellers, but maybe an AUM operation.

Mostly Voices [6:59]

And I have a straw. There it is. That's a straw. You see? Watching. And my straw reaches a groove. And starts to drink your milkshake.

Mostly Uncle Frank [7:17]

At least part of them are in RIA. At least they have that going for them.

Mostly Voices [7:26]

I drink your milkshake. I drink it up. Moving on.

Mostly Uncle Frank [7:34]

The next invitation went to Mary. Mary, Mary, why you buggin'? And it was for a complimentary gourmet meal at Ruth's Chris Steakhouse. Now she at least got a choice of what the meal was. You could get a classic filet, a 16 ounce ribeye, a stuffed chicken breast, or King Salmon Filet.

Mostly Voices [8:05]

Because we're adding a little something to this month's sales contest. As you all know, first prize is a Cadillac El Dorado. Anybody want to see second prize? Second prize, a set of steak knives. Followed by an informational seminar and insurance presentation. How about that insurance? Tell me, have you ever heard of single premium life? Because I think that really could be the ticket for you.

Mostly Uncle Frank [8:33]

Entitled Understanding Different Retirement Strategies presented by some of you who will not be named here.

Mostly Voices [8:38]

Forget about it.

Mostly Uncle Frank [8:45]

And they said Mary was going to have a little fun, a little fun with these topics to be covered. What do you mean funny? Funny how? The first fun topic is how our clients have kept money safe from market declines. Let me guess, a contract known as an annuity.

Mostly Voices [9:00]

Am I right or am I right or am I right? Right, right, right.

Mostly Uncle Frank [9:04]

Second fun topic：Do you have to risk loss to grow your assets? The answer is no, but how much do you want them to grow?

Mostly Voices [9:12]

How many lumps do you want? Oh, three or four? There's a reason there are things that are at risk-free rates.

Mostly Uncle Frank [9:23]

The next fun topic is Strategies to Feel Good About Preparing for Retirement. Do you want a chocolate? Don't they know it's not how you feel, it's how you look?

Mostly Voices [9:35]

I would rather look good than to feel good. You know what I'm saying to you, darling? You look marvelous.

Mostly Uncle Frank [9:42]

Apparently they didn't get that memo.

Mostly Voices [9:46]

It is better to look good than to feel good, my friends, and you look marvelous.

Mostly Uncle Frank [9:50]

Then the generic fun topic of strategies to achieve your long-term financial goals. And then oddly enough, another allegedly fun topic is, have you changed jobs in the last five years? That was weird, wild stuff. Because if you have, you've probably got a 401k still sitting there that we can roll over into an annuity product, pronto.

Mostly Voices [10:18]

A guy don't walk on the lot lest he wants to buy. They're sitting out there waiting to give you their money or you're gonna take it.

Mostly Uncle Frank [10:25]

And then is another fun topic in big all capital letters. Inflation. Oh, inflation. Fire and brimstone coming down from the skies. Will the yields on your savings be able to keep up with rising inflation? Rivers and seas boiling. 40 years of darkness, earthquakes, volcanoes. Interestingly enough, this fun topic conflicts with the other fun topic about do you have to risk loss to grow your assets? Because guess what? You're not going to not take any risk at all and still beat inflation. You can't handle the dogs and cats living together. And then the last fun topic in all caps, global economy. What impact could the Russian Ukraine crisis have on the economy and your retirement? The dead rising from the grave. Ooh, big scary war on some other continent. I don't mean to make light of it, but it probably does not have anything to do with Our retirement sitting over here. Forget about it. And then the punchline：Be informed. Learn about a tested and effective financial vehicle that is designed to give you an income that you can't outlive. I wonder what that could possibly be. Always be closing. Maybe if we just check the fine print here. You may be offered information regarding the purchase of insurance products. including fixed index annuities and life, period. Somebody needs a proof reader.

Mostly Voices [11:58]

Because only one thing counts in this life. Get them to sign on the line which is dotted.

Mostly Uncle Frank [12:06]

And a notice that the events are not sponsored nor endorsed by Ruth's Chris Steakhouse. The views, information or opinions expressed during these events are solely those of the presenters I do not necessarily represent those of Ruth's Chris Steakhouse and its employees. Well, maybe I should ask them for their advice. It might be better than this. And then our third invitation, which came to me. It actually came in an envelope this time, not just a postcard. It's top drawer. Really top drawer. You're cordially invited to attend an event for retirees or those planning to retire soon at the Capitol Grill.

Mostly Voices [12:49]

You were saying something, old boy?

Mostly Uncle Frank [12:54]

But unlike Mary's invitation, they still didn't tell me what the menu was and whether I could get that king salmon.

Mostly Voices [13:03]

You can't handle the banh mi's.

Mostly Uncle Frank [13:06]

This one chooses to go heavy on the fear marketing.

Mostly Voices [13:10]

Well, either you're closing your eyes to a situation you do not wish to acknowledge, or you are not aware of the caliber of disaster. As a country, we are facing many difficult challenges.

Mostly Uncle Frank [13:18]

Historic national debt levels, higher inflation, high interest rates, increased market volatility, and so much more. If you order now, we also got trouble right here in River City with a capital T that rhymes with P that stands for pool.

Mostly Voices [13:38]

Well, you got trouble, my friend. Right here I say trouble.

Mostly Uncle Frank [13:41]

The question many Americans are asking is, how does this affect my retirement and what can I do about it?

Mostly Voices [13:49]

And the next thing you know, your son is playing for money in a pinchback suit.

Mostly Uncle Frank [13:53]

And what will we learn at this event? We will learn, discover how tax legislation, that's in bold letters, tax legislation, may cost your family thousands in tax dollars. And that's trouble.

Mostly Voices [14:04]

Yes, you got lots and lots of trouble.

Mostly Uncle Frank [14:08]

I wonder if they recognize that the same tax legislation can be used to save you thousands of dollars. Fat, drunk, and stupid is no way to go through life, son. That's what I'm interested in. That's what I'm talking about. Retirement income, again in bold letters. Are you worried about running out of money in retirement?

Mostly Voices [14:26]

You got trouble, folks. Right here in River City. Trouble with a capital T, and that rhymes with P, and that stands for pool. I don't know, should I be?

Mostly Uncle Frank [14:36]

What else will we learn? Do you know how volatility in the market may impact your IRA, your IRA in bold letters, and 401k?

Mostly Voices [14:47]

Shameless music that'll grab your son, your daughter with the arms of a jungle, animal instinct, misteria.

Mostly Uncle Frank [14:55]

Uh, the same way it always has. I have the memo. Also offer to tell me how rising interest, those two words, rising interest rates will affect my portfolio and how I may increase earnings while safeguarding and that is in bold letters, safeguarding your investments from risk and that is in bold letters, risk. We've surely got trouble here in River City. You will also walk away with actionable steps for helping you protect your nest egg and retirement income. Well, it is for first time attendees only, by the way.

Mostly Voices [15:38]

Are you stupid or something? You might have figured something out if you show up twice.

Mostly Uncle Frank [15:44]

I'm not a smart man. Interestingly enough, this one's completely anonymous as to who it might be from. which is very strange.

Mostly Voices [15:55]

We were trapped. He had yellow eyes, so help me, God, yellow eyes.

Mostly Uncle Frank [16:02]

But maybe they haven't figured out who's showing up yet. Ned Ryerson.

Mostly Voices [16:09]

Needle nose Ned, the head tastes Western high. Ned Ryerson. I did the whistling belly button trick at the high school talent show. Anyway, we usually only get one of these a month or so.

Mostly Uncle Frank [16:22]

I thought it was interesting we got three almost simultaneously. BNG I can But it just goes to show you that the fear marketing of the financial services industry continues unabated. Trouble, troule, t.

Mostly Voices [16:47]

Remember my friends, listen to me because I passed this way but once. But enough of that.

Mostly Uncle Frank [16:54]

Let us now turn back to your concerns.

Mostly Voices [16:58]

Every Halloween, the trees are filled with underwear. Every spring, the toilets explode.

Mostly Uncle Frank [17:11]

Before we get to these emails, I did have a follow up on Pete's email from last episode where we were talking about fallacies and cognitive biases. And I neglected to mention one of the most important sources to read about that, which is a famous speech by Charlie Munger given in the 1990s about the psychology of human misjudgment. And it kind of pre-sages thinking fast and slow and a lot of the other work that was published after that. As always, Charlie Munger figured that out all by himself, or by reading other things long before it became popular public material. But anyway, there's a nice YouTube video of the whole speech, and then a nice summary that's about 15 minutes long of 24 of the misjudgments that he's talking about, and we'll put that in the show notes.

Mostly Voices [17:59]

But now, without further ado, here I go once again with the email. And...

Mostly Uncle Frank [18:06]

First off. First off, we have an email from Drew, who is one of our patrons on Patreon, and so went to the front of the line. You can do that by going to our support page, and all of the money collected there does go to our charity, the Father McKenna Center, which I will not elaborate on now since we have elaborated on it recently. But everything that you donate is appreciated, whether it comes through that mechanism or through direct donations. Please let me know when you send your email in. We do have a number of patrons lined up with their emails coming in the next couple of episodes here.

Mostly Mary [18:50]

Andrew writes：Alpha Architect themselves have equal weight value funds, QVALIV, AL. You can see their methodology on their website. Not tax advice, but Bokx may get better tax treatment than holding something like BIL if you don't sell before a year. Talk to your local tax guru. Also, regarding QMHIx from a previous episode, it trades hundreds of markets, multiple signals. It's also run at 15% volume. You can get the exact same fund, but run at a lower volume. 10, I believe, but don't quote me. That's ticker AQMIX. It does have a few things under the hood, pure trend, but also economic trend, and folks should look into it more thoroughly before allocating. Larry Swedroe recommends AQR's Managed Futures Fund in multiple books due to the fact that they use an ensemble of signals. On another note, DBMF replicates the SGCta Trend Index, which has more than just trend following. If you want pure trend following, check out the SG Trend Index subset. Ticker RSBT attempts to replicate the SG Trend Index. So, if you want trend plus other stuff, DBMF could be good for you. If you just want pure trend ETFs, KMLM and RSBT could be good for you. Best, Drew.

Mostly Uncle Frank [20:24]

Well, thank you for all this good information, Drew. The best, Jerry.

Mostly Voices [20:28]

The best.

Mostly Uncle Frank [20:32]

I am not an expert in this area, although I know more than most people about managed futures funds. This information goes beyond my knowledge, but I am sure others would appreciate it. I did go look up the SG CTA Index and the SG Trend Index and for comparison purposes, it does look like they are highly correlated, although the Trend Index appears to me more volatile and has a better return profile, at least over the past 20 some years. But I think that has something to do with the volatility. And when you think about it, that kind of makes sense because if you have an index of things and some of them are trend following and some of them aren't, but most of them are trend following, which I think is the case here. What the other ones do overall is tend to dampen or cancel out the trend followers. So you end up with something that has a lower return profile but is less volatile, in effect, less leveraged. And that to me would explain a lot of the difference between the performance of something like DBMF, which covers the whole index, and KMLM, Which does seem to be more volatile and behaves almost like a levered up DBMF fund. So I'll link to those indexes, that page in the show notes where you can compare them. And then also many of the other things that you've flagged for our attention. Yes. As always, thank you for your email. Second off. Second off, we have an email from Lauren.

Mostly Mary [22:11]

And Lauren writes, Once again, the Thoreau quote on Jeopardy! In self-reliance, Emerson wrote that a foolish consistency is this of little minds.

Mostly Uncle Frank [22:23]

And this is a question from Jeopardy! The Jeopardy! Masters Program. We need a little music to think about it for a little bit. And of course the answer is, what is the Hobgoblin? What is the Hobgoblin? And Emerson's writings and thought Processes do kind of infuse our culture to this day. They appear in surprising places. There's a very nice podcast I just listened to today about a book about Emerson. It is the Art of Manliness podcast, and the title of the podcast is How Emerson Can Help youp Become a Stoic Nonconformist. And it is about a book and guest is Mark Matusek. And he is the author of a book called Lessons from an American How Emerson Can Change youe Life. And if you're not familiar with Emerson, or even if you are, I would highly recommend that podcast. It goes over self-reliance and many other things. Bow to your sensei. Bow to your sensei. How serendipitous it was that your email popped up at the same time as this podcast. I think I've improved on your methods a bit, too. And thank you for that email. Last off. Last off. We have an email from Joe.

Mostly Voices [24:14]

And where you going with that gun in your hand?

Mostly Mary [24:26]

And Joe writes, Hi, Frank and Mary. I'd like to pick your wonderful brains a bit. I reached FIRE this week. Yeah, baby, yeah! I now have 25 times my annual expenses invested. My job is tolerable.

Mostly Voices [24:44]

I just stare at my desk, but it looks like I'm working. I do that for probably another hour after lunch, too. I'd say in a given week, I probably only do about 15 minutes of real, actual work.

Mostly Mary [24:55]

And I don't think I will quit soon, but if I am laid off, I won't try to find another one.

Mostly Voices [25:02]

I don't think I'd like another job.

Mostly Mary [25:05]

My kids are still young, seven and two, so we wouldn't be able to enjoy an early retirement just yet. My question is around how I should position my portfolio allocation when I have no clue when I'll start pulling money from it. I'm 39 years old. Should I stick 100% equity? I don't like that as too much volatility makes me anxious. Should I start moving money to a fixed income now or wait? Should I adopt a drawdown portfolio like the Golden Ratio now or when I'm laid off or quit? What are your thoughts? I really appreciate everything you do. Thanks, Joe.

Mostly Uncle Frank [25:53]

Well, the first reaction that I had and Mary and I talked about this and had the same reaction was that you should expect your expenses to grow in time with your children. Our experience was that the highest expenses were reached when they were in high school and then in college. I don't know how you plan to handle that if you plan to handle that. But I would keep that in mind and make sure that you are not just looking at your expenses today, but also thinking about what those expenses might be. I would add between 15 and 40%, depending on what your children are up to. The good news is that after you go over that hump, your expenses are likely to decline. Now getting to your specific questions, you really do have a choice here. And I would say that if holding all of that equity does make you nervous, then there isn't any reason now that you couldn't move to a risk parity or other retirement style portfolio. Because you will continue to accumulate and it will give you the option essentially of walking away from your work whenever you're ready to do that. Looks like you've been missing a lot of work lately. I would say I've been missing it, Bob. So in terms of optionality, that may be the best idea. It's interesting. I just appeared, actually today, on a podcast run by the Value Stock Geek, who has a website and a substack, I believe, and lots of information about value investing. But anyway, he also has a risk parity style portfolio he calls the Weird Portfolio. and he had also talked to Tyler of Portfolio Charts. Now both of them have taken their portfolios, one of them the Golden Butterfly, that's Tyler's portfolio and Value Stock Geek with his weird portfolio, and just use those as accumulation portfolios just because they don't want to have to deal with any more volatility in their lives. And I think that's just fine just so long as you understand that it will not accumulate over decades as fast as something with a lot more stock exposure in it. But if you don't need all that accumulation, then there's no reason to not move to something that is less volatile and more palatable, if you will. So I don't see any reason why you can't downshift now, especially if it's going to help you sleep at night. Snooze and dream.

Mostly Voices [28:30]

Dream and snooze. The pleasures are unlimited.

Mostly Uncle Frank [28:37]

Just make sure you are accumulating a little bit extra for what those children might be up to in the next decade or so. Donate to the Children's Fund.

Mostly Voices [28:44]

Why? What have children ever done for me?

Mostly Uncle Frank [28:48]

Because you do want to be able to say yes when that big event or opportunity comes up. So for example, our children all became involved with rowing, the sport of rowing, which we never anticipated when they were small, since neither one of us are rowers. and as part of that they went all over the place including a large trip to the Henley Royal Regatta, which is held at Henley on the Thames every year, a very English event.

Mostly Voices [29:19]

It's day five and semi-final Saturday here at Henley Royal Regatta. It's a time when the racing reaches fever pitch and the social side of what is one of the highlights of the British summer season really comes into its own.

Mostly Uncle Frank [29:30]

with women wearing the Fascinator hats and men all dressed up and the stewards wearing their bowler hats and walking around, making sure everybody was properly dressed. Well, no one does al fresco dining quite like this.

Mostly Voices [29:41]

The pre-race picnics are a massive part of Henley, and they're certainly picnics with flair. We're talking crystal glasses, China plates, delicious looking spreads and plenty of champagne.

Mostly Uncle Frank [29:57]

but our children were able to compete in that and we were able to come and watch them. So I probably would be putting some money aside for special events and things, even if you don't know exactly what they are at this point, because you never know when you might be participating in high tea at Henley. So this is the Gonzaga crew.

Mostly Voices [30:15]

Name check if you're watching in the states. Jackie Anong in the bow seats and then John Roberts in two with a distinctive cap on Brendan McCabe going down the boat with the shades on his head. Tom Vasquez, big man, isn't in the four-seat Christian tabash there in five wearing the shades. Joe Johnson, the man with the red t-shirts Winston Leslie in seven and then the stroke man Richard Hardy crossed by Stephen contagello. Hopefully that helps. and thank you for your email.

Mostly Uncle Frank [30:48]

But now I see our signal is beginning to fade. If you have comments or questions for me, please send them to frank@riskparityradio.com that email is frank@riskparityradio.com or you can go to the website www.riskparityradio.com put your message into the contact form and I'll get it that way. If you haven't had a chance to do it, please go to your favorite podcast provider and like, subscribe, give me some stars, a review, a follow. That would be great. Okay. Thank you once again for tuning in. This is Frank Vasquez with Risk Parity Radio signing off.

Mostly Mary [31:44]

the risk parody radio show is hosted by Frank Vasquez. The content provided is for entertainment and informational purposes only and does not constitute Financial investment, tax or legal advice.